The Risk and Opportunity in “Shadow” IT Spending

Do you know how much your organization actually spends on information technology? The answer may surprise you.

According to recent research from advisory firm CEB, “CIOs globally estimate that the ‘shadow’ IT spend in other areas of the business represents another 20 percent on top of the official IT budget. However, the real figure is closer to 40 percent.” Marketing, HR, operations and finance groups are most likely to have their own dedicated IT budgets.

Though it’s important for IT departments to understand and address the issues raised by these unofficial technology investments, “shadow” IT spending isn’t all bad. Andrew Horne, managing director at CEB, noted: “While the idea of ‘shadow spending’ has in the past been seen as a risk or threat, on the contrary it is often a sign of healthy innovation and presents a valuable opportunity for IT to work more closely with business partners to develop new capabilities.”

An enterprise request management (ERM) strategy can be invaluable in assuring that all technology spending is done efficiently (i.e., that departments don’t unnecessarily overpay or duplicate spending) and adheres to compliance and security requirements. The objective needn’t be excessively tight control, but rather a matter of providing guiderails to keep overall enterprise technology spending on track.

An ERM approach provides:

An intuitive, unified web portal for all types of service requests, across all shared services functions within an enterprise. Giving department managers a common, easy to use tool for creating, managing and optimizing their own request process workflows reduces the perceived need to work “outside the system.”

Transparency in service costs, so everyone understands the costs and other departments can work with IT to minimize technology-related service delivery costs.

Exposure for all available services, whether delivered by a single functional group or through the coordinated efforts of different departments. This helps avoid duplicate efforts or spending, and helps functional groups identify opportunities for increased coordination to reduce service fulfillment time and costs.

While shadow IT spending is a concern for CIOs, it presents opportunities as well as risks. Utilizing an ERM approach to service request and fulfillment can help IT groups reduce unneeded spending and address compliance and security concerns while giving functional groups the flexibility they need to improve their own processes and efficiency through technology acquisition.